ITT-Cablevision Deal Reported To Buy Madison Square Garden

By MURRAY CHASS

Published: August 28, 1994

Madison Square Garden and its properties -- including the Knicks, the Rangers and the MSG network -- will be sold to Cablevision Systems, a cable television giant based on Long Island, and the ITT Corporation, executives of a rival bidder said yesterday.

Officials of the Garden's owner, Viacom Inc., did not announce a deal today, but executives of the competing bidder, the Liberty Media Corporation, said they were told they had lost the bidding contest. Viacom acquired the Garden and its related properties when it merged earlier this year with Paramount Communications Inc.

"They said Viacom told them it's a done deal -- it's over," said a New York business executive who also has sports interests and is close to Liberty Media officials.

Although several companies had previously expressed interest in the arena and sports franchises, the final negotiations had come down to ITT-Cablevision and Liberty, which is owned by Tele-Communications Inc., the nation's largest operator of cable television systems.

Cablevision, which would appear to be the operating partner in the deal, has no experience at running a team, although Charles F. Dolan, the head of Cablevision, tried unsuccessfully to buy the New York Islanders from John Pickett last year. Nor has it run a sports arena like Madison Square Garden.

With the deal, Cablevision would gain sweeping control over television sports coverage in the New York market. The company currently shows games of the New York Mets and Islanders and the New Jersey Nets and Devils on its Sportschannel pay-cable outlet. Games of the Knicks, Rangers and Yankees are carried on the MSG Network.

Richard J. Kessel, executive director of the New York State Consumer Protection Board, said he was concerned that two leading sports channels would be owned by the same parent, "which also happens to be a cable operator." A lawyer familiar with the bidding, referring to Mr. Dolan, asked a similar question. "How is Dolan going to be the only pay-TV service controlling sports in a city like New York?" he said. "I'm sure there is going to be some government fight. I don't think New York City and and the Feds will sit by and take this lightly." Federal regulatory officials could not be reached last night for comment on the deal. Officials of Cablevision and ITT did not return telephone calls last night seeking comment.

Selling the Garden will help Viacom down the debt it assumed when it acquired Paramount for $9.7 billion.

The winning bid was said to be close to $1.1 billion. Liberty Media had offered $1 billion. Some financial analysts on Wall Street, who had estimated the value of the Garden properties at no more than $600 million to $700 million, said the bids seemed quite high.

The effect on the Knicks and Rangers is not clear because team ownership would be new to the Cablevision-ITT group. Paramount had lavished many resources on the two teams, allowing them to acquire top-shelf players like the Rangers' Mark Messier and million-dollar-a-year leaders like Pat Riley, the Knicks coach, and Mike Keenan, the former Rangers coach.

It remains to be seen, however, whether a new owner would leave the Knicks' ruling threesome of Dave Checketts, Ernie Grunfeld and Mr. Riley alone, or superimpose its own ideas of how to push the Knicks up one more level to win the N.B.A. title.

As the head of Cablevision Systems Inc., the nation's fourth-largest cable operator, Mr. Dolan has made sports programming -- particularly of New York sports -- a central pillar of his company's growth for nearly three decades. Based in Woodbury, L.I., Cablevision today has 2.5 million subscribers in 19 states. Fully 1.4 million of those subscribers are concentrated around the New York metropolitan area.

ITT, on the other hand, is a conglomerate that has $750 million to $1 billion of cash on hand and a stated desire to augment its operations in businesses like the Sheraton hotel chain, auto parts manufacturing and other industrial production, insurance and financial services.

The difference in the value of the bids was apparently not the decisive factor in the outcome of the deal. Viacom had originally hoped to strike an agreement with Liberty and Tele-Communications that would involve not only a sale of the Garden but also the resolution of some disputes with Tele-Communications' chairman, John C. Malone.

But those negotiations fell apart earlier this week over major concessions sought by Viacom, one executive close to Liberty said. "They became so big they became dominant," he said.

Liberty Media seemed resigned yesterday to having lost the race.

"If in fact they've won, it wasn't our manifest destiny at all," Peter Barton, the head of Liberty, said. "Congrats to the Viacom guys for an auction well done. Perhaps they'll let us have a ticket for a playoff game."

The Garden, the Knicks and the Rangers have gone through a series of owners. They wound up with Viacom when that company took over Paramount earlier this year in a $9.7 billion purchase. Not long after the transaction was completed, the Rangers won the National Hockey League championship for the first time since 1940 and the Knicks went to the National Basketball Association finals.